Moody’s Warns of Risks from Stablecoin Boom in Emerging Markets

Moody’s Ratings has issued a stark warning about the rapid adoption of stablecoins in emerging markets, highlighting potential threats to financial stability. The trend toward 'cryptoization'—where dollar-pegged digital tokens replace local currencies—could erode central banks’ control over monetary policy and weaken traditional banking systems.

Less than 30% of jurisdictions globally have established comprehensive digital asset regulations, creating fertile ground for systemic risks. Emerging markets are particularly vulnerable as citizens turn to stablecoins for inflation hedging and cross-border remittances, accelerating deposit flight from conventional banks.

While Europe and the US advance regulatory frameworks for stablecoins, most developing economies lack the infrastructure to mitigate associated risks. The absence of coordinated global oversight exacerbates concerns about monetary sovereignty erosion in inflation-prone nations.